Videoconferencing: Cisco, Logitech Target the Mainstream

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The technology, designed to bring high-quality videoconferencing to everyday PCs, automatically adjusts so each attendee of a conference gets the best picture possible. The cost is mere pennies on a per-minute basis, compared with dollars for TelePresence, analysts say. Google (GOOG) uses Vidyo's technology to power its Video Chat service. "Vidyo offers great value at a fraction of the cost," says Wainhouse Research's Andrew Davis.

And Joel Dehlin, chief information officer for the Church of Jesus Christ of Latter-day Saints, has made Vidyo available to hundreds of his IT staffers. The goal is to one day give many of the church's 52,000 missionaries—many of them in remote locales—a real-time way to get training and support. And while many existing systems require a private network connection costing thousands of dollars a month, Vidyo (like LifeSize and others) runs over the plain old Internet. "The places we need videoconferencing are the places it just doesn't work," Dehlin says. "This has opened up the world to us."

The Consumer Market

Videoconferencing purveyors are using more than just price to make the technology more accessible. Herndon (Va.)-based Reality Mobile sells much higher-end, more secure software that helps companies such as oil producers push video to the hardest-to-reach places. For instance, a technician at headquarters can use Reality Mobile to show local roughnecks on an offshore rig how to make a repair. Also, a host of big phone companies are working on ways to offer videoconferencing services to businesses for a monthly or per-call fee.

Next up for the videoconferencing industry: consumers. At CES in Las Vegas in January, Cisco plans to unveil its first TelePresence system for consumers, priced at $5,000 or less, people familiar with the company's plans say. Cisco declined to comment. But the hottest growth may come from gear used on PC desktops, rather than big-screen TVs. Gartner (IT) predicts that 200 million people will pay for desktop videoconferencing by 2015. Indeed, Polycom recently conducted focus groups inviting businesspeople to play with everything from Cisco's TelePresence to videophones to PC-based software that could be used with a Webcam. "Far and away, the one they gravitated to was the PC system," says Polycom Vice-President Joe Sigrist. "It was mobile, and it suited the way they worked."

Sales have only recently begun to catch up with the hype. The market generated $1.4 billion in 2008, up from $800 million in 2006. And while Cisco bragged about 100% growth in TelePresence sales in its most recent quarter, only 500 or so companies have purchased a system since it went on the market three years ago. "There are only so many CEOs John Chambers can take out on the golf course and sell a TelePresence system to," says Wainhouse's Davis.

Still, judging from all the M&A and other dealmaking, alternative conferencing products may find many takers. "I look forward to the day when companies say I need 30,000 [copies of Vidyo] because I have 30,000 employees," says Vidyo CEO Ofer Shapiro. "Who knows, what if we have the key to unlock this market, at just the right time?"

Burrows is a senior writer for BusinessWeek, based in Silicon Valley.

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